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CA Foundation · Business Laws · The Negotiable Instruments Act, 1881

Kavita draws a cheque dated 10 January 2024 in favour of Imran. Imran presents it to the bank only on 20 October 2024, and the bank dishonours it for insufficient funds. Imran claims the cheque is still valid. What is the position under the Act's presumptions and rules?

The cheque is stale because it was presented more than three months after its date. Banks treat cheques as valid for only three months from the date, so Imran cannot rely on it without getting a fresh one.

  1. AThe cheque is valid because the presumption of date lets a cheque be presented at any time
  2. BThe cheque is valid for 6 months, so it is still good
  3. CThe cheque became stale because it was not presented within three months of its date, so the bank will not honour itCorrect
  4. DThe cheque is valid for one year from its date

Explanation

Under the RBI rule applicable to banks, a cheque is valid for three months from its date. Presentation after about nine months makes it stale. Options B and D give wrong validity periods.

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